Source: IRIS (01-APR-13)
The Indian auto and auto components industry is currently facing its most formidable challenge - that of slowing demand and that too across the board.
"After a frenzied period of 2009-10 and 2010-11 when all automotive spots - domestic OEMs, exports and replacement market - shone bright, the year 2011-12 marked the commencement of a slowdown phase as volumes in the domestic Passenger Vehicle (PV) and Medium & Heavy Commercial Vehicle (M&HCV) segments began to stutter. If the year 2011-12 was bad, the year 2012-13 has turned out to be worse as other segments too including the domestic Two-Wheeler (2W) segment as also exports to overseas OEMs and tier-1 players have come into the grips of the slowdown. While the revenue growth of diversified auto component manufacturers had been steady till Q1 2012-13, the across the board weakness in demand witnessed during the last two quarters has tended to neutralize this structural advantage otherwise enjoyed by such players," ICRA Research said.
On the exports front, auto component supplies to Europe had already been witnessing sluggish growth over the last few years, but steady expansion in demand for Light Vehicles and Commercial Vehicles (CVs) in North America was adequately offsetting the overall exports weakness, it said. However, starting Q2 2012-13, auto parts exports to USA also have declined significantly, particularly related to parts meant for CV applications due to sharp contraction in demand (partly due to inventory correction due to build-up during H1CY2012). Component suppliers to the domestic replacement market have also been experiencing moderation in growth, but this segment, as expected, has been relatively more resilient if not fully immune. As per our sample of 35 publically - listed auto component manufacturers, the average revenue growth of these select entities (during the last eight quarters) has been steadily declining with YoY growth being lower in each passing quarter since Q1 2011-12.
''Yet, the revenue growth of select auto component manufacturers has been much higher than the industry’s on the back of market share gains, favourable change in model mix, rise in content per vehicle, besides revenue accretion due to corporate actions such as acquisitions and amalgamations. Over the short term, we expect the auto component industry's revenue growth to remain weak in the absence of immediate demand triggers for end-users across domestic automotive segments, besides an uncertain global economic environment resulting in slow automobile demand recovery and hence faltering export volumes,'' it added.
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(Source : http://www.myiris.com/newsCentre/storyShow.php?fileR=20130401164547715&dir=2013/04/01)
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